Faust in the Conference Room
Johann Wolfgang von Goethe told the story of a man who sold his soul for knowledge and power. Mephistopheles kept the bargain—Faust received what he wanted. The problem lay in what he had not foreseen.
Raising external financing has a Faustian structure. You receive the capital you need. In exchange, you give up something whose value you will fully understand only later—control, autonomy, future profits, sometimes the company itself.
This does not mean you should not take the money. It means you should know what you are signing.
The Asymmetry of Experience
A venture capital fund has seen hundreds of transactions. You are seeing your first.
The fund knows which clauses are standard and which extract value. It knows where the traps of liquidation preference lie hidden. It knows how drag-along can force you into a sale you do not want. It knows because it has done this dozens of times.
You know how to build a product, win a customer, manage a team. But the term sheet is not your language. And in this asymmetry of experience—not knowledge, not intelligence, just experience—you lose the negotiation before it begins.
A lawyer levels the playing field. Not because they are smarter than you—because they have seen more term sheets.
Machiavelli on Allies
Niccolò Machiavelli warned against alliances with the stronger party. Even when you win together, it is the stronger who reaps the fruit. The weaker is left with the illusion of partnership and the reality of dependence.
An investor is not your enemy. But neither are they your friend. They are a counterparty to a transaction with interests of their own—and those interests do not always align with yours.
Their success is an exit with a high return. Your success may be something else: a company you build over decades, independence, values you wish to realize. These goals may converge. They may also diverge dramatically.
The investment agreement defines what happens when goals diverge. And in that definition, the devil is in the details.
A Topography of Traps
Dilution. Your sixty per cent today may be fifteen per cent after three rounds. Each new tranche of shares dilutes your position. Do you have preemptive rights on new issuances? Can you defend your stake?
Liquidation preference. The investor recovers their amount before you do. Sometimes a multiple of their amount. In a bad scenario, you sell the company for ten million and see not a penny, because the preference consumes everything.
Drag-along. The investor can compel you to sell your shares if they find a buyer. Your consent? Not required—because you signed the drag-along.
Founder vesting. Yes, even your own shares may be subject to vesting. Leave before the cliff—and you lose part of what you built.
Control clauses. Veto rights on key decisions. Investor consent for hiring, for expenditures above a threshold, for strategic pivots. Formally you hold a majority. Practically, you can do nothing without permission.
Ratchet and anti-dilution. When the next round comes at a lower valuation, the investor receives additional shares for free. You do not.
Nash and the Balance of Power
John Nash proved that in non-cooperative games an equilibrium exists—a point at which no party can unilaterally improve its position. The problem: Nash equilibrium need not be fair.
Negotiating with an investor is a game. Each side maximizes its own position. The outcome depends on negotiating power—and power derives from alternatives.
If you have multiple investors interested, you have power. If you have only one—the investor dictates the terms.
This is why timing matters. Why a pipeline of alternatives matters. And why preparation for negotiation—knowing your BATNA—is half the battle.
What We Do Before the Transaction
We analyze the term sheet. Before you sign the letter of intent—what exactly is on the table? Which terms are standard, which dangerous?
We map the traps. Dilution, preferences, drag-along, vesting—where are the risks for founders? What can be negotiated better?
We prepare counterproposals. The investor has presented their template. We present yours—or modifications that protect your interests.
We simulate scenarios. Exit at X, exit at Y, liquidation, subsequent rounds—what do your shares and your money look like in each scenario?
Coase on Transaction Costs
Ronald Coase argued that firms exist because transaction costs in the market are high. It is cheaper to coordinate within a structure than to negotiate each exchange separately.
An investment agreement creates a structure—a set of rules that reduce the costs of future conflicts. Good rules minimize friction. Bad rules generate disputes, negotiations, renegotiations, sometimes litigation.
Time spent on precision in the agreement is an investment in lower transaction costs over years of collaboration. This is not legal perfectionism—it is economics.
What We Do During the Transaction
We negotiate terms. At the table or through document exchanges. With a mandate from you—knowing where you can yield and where the line is firm.
We prepare documentation. The investment agreement, shareholders’ agreement, amendments to the articles of association, board regulations. The full package that closes the transaction.
We coordinate due diligence. The investor examines your company. We help prepare the data room, answer questions, close gaps that could kill the deal.
We monitor conditions precedent. What must happen before closing? Regulatory consents, representations, reorganizations. We ensure nothing falls through the cracks.
Akerlof on Information Asymmetry
George Akerlof received a Nobel Prize for analyzing markets with information asymmetry. When the seller knows more than the buyer, the market breaks down—good products disappear, only “lemons” remain.
In investment transactions, asymmetry works both ways. You know more about the company—and may be accused of concealing problems. The investor knows more about the terms—and may exploit your ignorance.
Due diligence is a mechanism for reducing asymmetry. But it works both ways: the investor examines you; you should examine the investor. What is their track record? How do they treat founders after the transaction? What do others who took their money say?
What We Do After the Transaction
We monitor the fulfillment of obligations. The investment agreement is not the end—it is the beginning. Deadlines, milestones, reporting duties. We help you keep track of commitments.
We advise on subsequent rounds. Series B after Series A, expansion after consolidation. Each round shifts the balance of power—we ensure you do not give up more than you must.
We mediate conflicts. When the visions of founder and investor diverge—we seek solutions that do not end in court.
We represent in disputes. When mediation fails—we fight for your rights, your shares, your company.
Pareto and Optimization
Vilfredo Pareto described situations in which one party’s position cannot be improved without worsening another’s. A Pareto optimum is a point from which every change is a zero-sum game.
Good investment negotiations seek points before the Pareto optimum—solutions that improve the position of both sides. A structure that gives the investor security without taking away your control. Terms that motivate you to grow without imprisoning you in a gilded cage.
Bad negotiations are a fight over dividing the pie. Good negotiations enlarge the pie before dividing it.
When to Come to Us
Before you start looking for an investor. Corporate structure, legal clean-up, preparation for due diligence. It is easier to fix problems before someone starts looking for them.
When you receive a term sheet. The first document that shapes the transaction. Here the framework is decided—and here is the greatest room for negotiation.
When negotiations grow complicated. The investor demands more than you can give. Terms are changing. You need someone to defend your boundaries.
When you have doubts. Something feels wrong, but you do not know what. Sometimes a fresh perspective is enough to see the trap.
In Closing: Capital and Control
Peter Thiel wrote that in startups, what matters most is foundership—the vision of the person who created the company. Investors provide capital, but founders provide the soul.
The investment agreement determines how much of the soul you keep. How much control. How much ability to realize the vision that brought you here.
Capital is necessary. But capital without control is labor for someone else’s goals. Control without capital is a dream without the means to realize it.
We help find the balance—to raise the financing you need without losing the company you built.
Because your company is more than an asset to be sold. It is your work
